A Study on Emotional Finance and Its Influence on Investment Pattern of Investors >with Special Reference to Stock Market Investments

Emotional finance is a new area in finance and is at an early stage of its development as a coherent discipline. It aims to provide an understanding of financial market behavior and investment processes by formally recognizing the role of unconscious needs and fears play in all investment activity. The objective of this research is to study the emotions that play in the trading and investment activity of the investors and to analyze the impact of emotions on the stock market investments. The data was collected extensively from Coimbatore district in Tamil Nadu identifying investors through share broker officers and financial institutions. The research findings are investment decisions involve emotions. The investors ‘fall in the confidence’ that may follow a big loss, leading to inability to make a buy or sell decisions and the investors finds inability to stick with the planned strategies due to this emotional influence. Respondent's emotions or the brain activity affects the stock market financial decisions, the respondents take bigger risk to avoid loss and they trust in instincts. It is concluded that there is association between the risk appetites of the respondents with that of the level of education of the respondents. By understanding the emotions in human behavior and psychological mechanisms involved in financial decision-making, standard finance models may be improved to better reflect and explain the reality in today's evolving markets. The ability to understand the judgment heuristics like rationality or irrationality of the investment pattern and experience along with emotional management would enable the investor to act with caution as the consequences are likely to affect the asset value, lifestyle, relationship with others and social interaction.